TIDM80UC
RNS Number : 2100H
Connect M77/GSO
30 July 2019
Registration number: 04698798
Connect M77/GSO plc
Annual Report and Financial Statements
for the Year Ended 31 March 2019
Connect M77/GSO plc
Contents
1 to
Strategic Report 3
4 to
Directors' Report 5
Statement of Directors' Responsibilities 6
7 to
Independent Auditor's Report 11
Profit and Loss Account 12
Balance Sheet 13
Statement of Changes in Equity 14
15 to
Notes to the Financial Statements 25
Connect M77/GSO plc
Strategic Report for the Year Ended 31 March 2019
The Directors, in preparing this strategic report, have complied
with s414C of the Companies Act 2006.
Principal activity
The Company is incorporated in Great Britain, registered in
England and Wales and domiciled in the United Kingdom.
On 7 May 2003 Connect M77/GSO plc signed a contract with East
Renfrewshire Council (on behalf of the Scottish Government for the
M77 and South Lanarkshire Council and East Renfrewshire Council for
the Glasgow Southern Orbital (GSO)) to design, build, finance and
operate (DBFO) the M77 from Fenwick to Malletsheugh and the GSO
from Malletsheugh to Philipshill, East Kilbride and sections of the
A726 and to maintain these roads under a licence over a 32 year
period as well as modify certain sections of the A77. In accordance
with the concession agreement the Company is responsible for
operating the roads together with carrying out all of the routine
and major life cycle maintenance for the life of the
concession.
The new road sections were opened to the public in April 2005
and the final completion certificate was issued in September
2005.
There have been no changes to the Company's activities in the
year under review and none are currently contemplated.
Review of business
The results for the year are set out on page 12. The loss for
the year before taxation was GBP14,000 (2018: GBP33,000) and the
net liabilities position as at 31 March 2019 is GBP29,139,000
(2018: GBP29,127,000) for the Company.
The financial position at the year-end is in-line with the
Directors' expectations and can be found on page 13.
Key performance indicators
The Company has set specific business objectives, which are
monitored using a number of key performance indicators ("KPIs").
The relevant KPIs for this report are detailed below:
2019 2018
GBP 000 GBP 000
Turnover 2,926 2,380
Loss after taxation (12) (32)
Net liabilities (29,139) (29,127)
======== ========
Despite the Company showing net liabilities, the Company's
projections, taking account of reasonably possible counterparty
performance, show that the Company expects to be able to continue
to operate for the foreseeable future. Accordingly, they continue
to adopt the going concern basis in preparing the annual report and
financial statements.
Connect M77/GSO plc
Strategic Report for the Year Ended 31 March 2019
(continued)
Principal risks and uncertainties
The Company recognises that effective risk management is
fundamental to achieving its business objectives in order to meet
its commitments in fulfilling the PFI contract and in delivering a
safe and efficient service. Risk management contributes to the
success of the business by identifying opportunities and
anticipating risks in order to improve business performance and
fulfil our contractual obligations.
Credit and cash flow risk
The relevant financial risks to the Company are credit and cash
flow risks, which arise from its primary client, East Renfrewshire
Council. The credit and cash flow risks are not considered
significant as the client is a government organisation.
Interest rate risk
The financial risk management objective of the Company is to
ensure that financial risks are mitigated by the use of financial
instruments where they cannot be addressed by means of contractual
provisions. There are no derivatives, risk is mitigated through a
fixed rate loan instrument. Financial instruments are not used for
speculative purposes.
Liquidity risk
The Company's liquidity risk is principally managed through
financing the Company by means of long-term borrowings, with an
amortisation profile that matches the expected availability of
funds from the Company's operating activities. In addition, the
Company maintains reserve bank accounts to provide short-term
liquidity against future debt service and other expenditure
requirements.
The Company has a net liability position which is caused by the
rolled up subordinated debt interest and principal amounts due to
the shareholders. This does not cause an issue for going concern
since the shareholders have waived their rights to receive interest
for the year to 31 March 2020. As such the Company has the required
funds to meet debt obligations as they fall due for the following
year.
Contractual relationships
The Company operates within a contractual relationship with its
primary customer, East Renfrewshire Council. A significant
impairment of this relationship could have a direct and detrimental
effect on the Company's results and could ultimately result in
termination of the concession.
To manage this risk the Company has regular meetings with East
Renfrewshire Council including discussions on performance, project
progress, future plans and customer requirements.
The Directors do not believe that the Company is exposed to any
significant Financial Risk. The Company's principal activity as
detailed above is low risk as all relationships with the customer,
funders and sub-contractors within the Company in which it sits are
determined by the terms of the respective contracts.
Brexit
The Directors have considered the potential consequences to the
Company of the United Kingdom leaving the European Union and, as at
the date of signing the report, do not anticipate that this will
have a significant impact on the Company. This is primarily because
the Company's contractual agreements, including those which cover
its financing, are unlikely to be affected.
Connect M77/GSO plc
Strategic Report for the Year Ended 31 March 2019
(continued)
Future developments
The Directors expect the general level of activity to remain
stable in the forthcoming year. There have been no other changes to
the Company's activities in the year under review and no others are
currently contemplated.
Approved by the Board on .................... and signed on its
behalf by:
.........................................
P McCarthy
Company secretary
Connect M77/GSO plc
Directors' Report for the Year Ended 31 March 2019
The Directors present their annual report together with the
audited financial statements for the year ended 31 March 2019.
The following information has been disclosed in the Company
Strategic Report:
-- Principal activities and business review
-- Key performance indicators
-- Principal risk management
-- Indication of likely future developments in the business
Results and dividends
The audited financial statements for the year ended 31 March
2019 are set out on pages 12 to 25. The loss for the year after tax
was GBP12,000 (2018: GBP32,000).
The Directors declared and paid dividends of GBP- (2018: GBP-)
The Directors expect the Company to continue its operations for the
foreseeable future.
Directors of the Company
The directors who held office during the year were as
follows:
D G Blanchard
D W Bowler
M J Edwards
M P Mageean
Going concern
The Company's forecasts and projections, taking account of
reasonable possible changes in trading performance, show that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, the Directors continue to
adopt the going concern basis in preparing the financial
statements. Further information is provided in note 1 to the
financial statements.
Disclosure of information to the auditors
Each of the persons who is a Director at the date of approval of
this report confirms that:
-- so far as the Director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and
-- the Director has taken all the steps that he ought to have
taken as a director in order to make himself aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the Companies Act
2006.
Connect M77/GSO plc
Directors' Report for the Year Ended 31 March 2019
(continued)
Reappointment of auditors
The auditors KPMG LLP are deemed to be reappointed under section
487(2) of the Companies Act 2006.
Approved by the Board on .................... and signed on its
behalf by:
.........................................
P McCarthy
Company secretary
Registered office
6th Floor
350 Euston Road
Regent's Place
London
NW1 3AX
Connect M77/GSO plc
Statement of Directors' Responsibilities in respect of the
Annual Report and the Financial Statements
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with UK
Accounting Standards and applicable law (UK Generally Accepted
Accounting Practice), including FRS 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss for that period. In preparing these financial statements, the
Directors are required to:
-- select suitable accounting policies and apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or
have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
and Corporate Governance Statement that complies with that law and
those regulations.
Responsibility statement of the Directors in respect of the
Annual Financial Report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
or loss of the Company; and
-- the Strategic Report and Directors' Report includes a fair
review of the development and performance of the business
and the position of the issuer, together with a description
of the principal risks and uncertainties that they face.
.........................................
P McCarthy
Company Secretary
Date: ...............................
Connect M77/GSO plc
Independent Auditor's Report to the Members of Connect M77/GSO
plc
Opinion
We have audited the financial statements of Connect M77/GSO plc
(the 'Company') for the year ended 31 March 2019, which comprise
the Profit and Loss Account, Balance Sheet, Statement of Changes in
Equity, and related notes, including the accounting policies in
note 1.
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's affairs
as at 31 March 2019 and of its loss for the year then ended;
-- have been properly prepared in accordance with UK accounting
standards, including FRS 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland; and
-- have been prepared in accordance with the requirements of
the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
Directors.
We were first appointed as auditor by the directors on 17
October 2016. The period of total uninterrupted engagement is for
the 3 financial years ended 31 March 2019. We have fulfilled our
ethical responsibilities under, and we remain independent of the
Company in accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed public interest entities.
No non-audit services prohibited by that standard were
provided.
Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below
the key audit matters, in decreasing order of audit significance,
in arriving at our audit opinion above, together with our key audit
procedures to address those matters and, as required for public
interest entities, our results from those procedures. These matters
were addressed, and our results are based on procedures undertaken,
in the context of, and solely for the purpose of, our audit of the
financial statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion, and we do
not provide a separate opinion on these matters.
Service revenue recognition
(GBP2,926k; 2018: GBP2,380k)
Refer to page 14 (accounting policy) and page 16 (financial
disclosures).
The risk
The amount of service revenue recognised is calculated via a
mark-up being applied to costs incurred during the year. The
mark-up is determined from a long term financial model which acts
as a long term forecast of the revenues and costs to be incurred on
the project. A significant portion of the service provision and the
associated performance risk, are outsourced to subcontractors with
costs contractually agreed over the life of the contract. Lifecycle
replacement risk remains with the Company and is a significant
estimate.
A fraud risk exists as management could manipulate the amount of
revenue recognised either through amending the future forecast
assumptions, particularly through the lifecycle costs which are a
key estimate (see note 2 for details) and hence change the mark-up
applied to the costs on which revenue is recognised or by applying
the mark-up to costs which are not related to the provision of the
services under the concession contract.
Connect M77/GSO plc
Independent Auditor's Report to the Members of Connect M77/GSO
plc (continued)
Our response
Our procedures included:
-- Service revenue recalculation: We recalculated service revenue
based upon the costs incurred which relate to provision of
services under the concession contract using the mark-up determined
in the financial forecasts and compared this to the amounts
recorded.
-- Comparing forecasts: We challenged the appropriateness of
cost estimates and assessed whether or not estimates showed
any evidence of management bias. Our challenge was based upon
our assessment of historical accuracy of the Company's forecasts
through comparison of current year actual costs, a sample
of which have been verified to supplier invoices, versus prior
year forecast, comparison of forecast cost estimates in current
year versus the prior year and expectations based on our knowledge
of the Company and experience of the industry in which it
operates.
Our application of materiality and an overview of the scope of
our audit
Materiality for the statutory financial statements as a whole
was set at GBP1,410,000 (2018: GBP720,000) determined with
reference to a benchmark of total assets, of which it represents 1%
(2018: 0.5%).
We agreed to report to the Board any corrected or uncorrected
identified misstatements exceeding GBP70,000 (2018: GBP36,000), in
addition to other identified misstatements that warranted reporting
on qualitative grounds.
Our audit of the company was undertaken to the materiality level
set out above.
We have nothing to report on going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements ("the going concern period").
Our responsibility is to conclude on the appropriateness of the
Directors' conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the Company will
continue in operation.
In our evaluation of the Directors' conclusions, we considered
the inherent risks to the Company's business model, including the
impact of Brexit, and analysed how those risks might affect the
Company's financial resources or ability to continue operations
over the going concern period. We evaluated those risks and
concluded that they were not significant enough to require us to
perform additional audit procedures.
Based on this work, we are required to report to you if we have
concluded that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty that
may cast significant doubt over the use of that basis for a period
of at least a year from the date of approval of the financial
statements.
We have nothing to report in these respects, and we did not
identify going concern as a key audit matter.
Connect M77/GSO plc
Independent Auditor's Report to the Members of Connect M77/GSO
plc (continued)
We have nothing to report on the Strategic Report and Directors'
Report
The Directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Based solely on our work on the other information:
-- we have not identified material misstatements in the Strategic
Report and the Directors' Report;
-- in our opinion the information given in those reports for
the financial year is consistent with the financial statements;
and
-- in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
We have nothing to report on the other matters on which we are
required to report by exception
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches
not visited by us; or
-- the financial statements are not in agreement with the accounting
records and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 6,
the Directors are responsible for: the preparation of the financial
statements and for being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Connect M77/GSO plc
Independent Auditor's Report to the Members of Connect M77/GSO
plc (continued)
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see
below), or error, and to issue our opinion in an auditor's report.
Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
Irregularities - ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our sector experience and through discussion with
the directors and other management (as required by auditing
standards), and discussed with the directors and other management
the policies and procedures regarding compliance with laws and
regulations. We communicated identified laws and regulations
throughout our team and remained alert to any indications of
non-compliance throughout the audit.
The potential effect of these laws and regulations on the
financial statements varies considerably.
The company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation),
distributable profits legislation and taxation legislation and we
assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement
items.
Whilst the company is subject to many other laws and
regulations, we did not identify any others where the consequences
of non-compliance alone could have a material effect on amounts or
disclosures in the financial statements.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations (irregularities) is from the events and
transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards
would identify it. In addition, as with any audit, there remained a
higher risk of non-detection of irregularities, as these may
involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are
not responsible for preventing non-compliance and cannot be
expected to detect non-compliance with all laws and
regulations.
Connect M77/GSO plc
Independent Auditor's Report to the Members of Connect M77/GSO
plc (continued)
The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
......................................
Tom Eve (Senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
15 Canada Square
London
E14 5GL
Date:.............................
Connect M77/GSO plc
Profit and Loss Account for the Year Ended 31 March 2019
2019 2018
Note GBP 000 GBP 000
Turnover 3 2,926 2,380
Cost of sales (2,448) (1,992)
-------- --------
Gross profit 478 388
Administrative expenses (346) (281)
-------- --------
Operating profit 132 107
Interest receivable and similar income 7 9,532 9,610
Interest payable and similar expenses 8 (9,678) (9,750)
-------- --------
Loss before tax (14) (33)
Taxation 9 2 1
-------- --------
Loss for the financial year (12) (32)
======== ========
The above results were derived from continuing operations.
The Company has no recognised gains or losses for the year other
than the results above. Accordingly no statement of comprehensive
income is presented.
Connect M77/GSO plc
(Registration number: 04698798)
Balance Sheet as at 31 March 2019
2019 2018
Note GBP 000 GBP 000
Non current assets
Financial asset 11 120,695 122,820
Current assets
Debtors 12 1,676 148
Investments 13 16,688 16,867
Financial assets 11 1,759 1,073
Cash at bank and in hand 1,908 3,009
--------- ---------
22,031 21,097
Creditors: Amounts falling due within
one year 14 (7,196) (6,366)
--------- ---------
Net current assets 14,835 14,731
--------- ---------
Total assets less current liabilities 135,530 137,551
Creditors: Amounts falling due after
more than one year 14 (163,119) (165,126)
Deferred tax liabilities 10 (1,550) (1,552)
--------- ---------
Net liabilities (29,139) (29,127)
========= =========
Capital and reserves
Called up share capital 17 50 50
Profit and loss account (29,189) (29,177)
--------- ---------
Total equity (29,139) (29,127)
========= =========
Approved and authorised by the Board on .................... and
signed on its behalf by:
.........................................
M P Mageean
Director
Connect M77/GSO plc
Statement of Changes in Equity for the Year Ended 31 March
2019
Called up Profit and
share capital loss account Total
GBP 000 GBP 000 GBP 000
At 1 April 2017 50 (29,145) (29,095)
Total comprehensive income - (32) (32)
-------------- ------------- --------
At 31 March 2018 50 (29,177) (29,127)
============== ============= ========
Called up Profit and
share capital loss account Total
GBP 000 GBP 000 GBP 000
At 1 April 2018 50 (29,177) (29,127)
Total comprehensive income - (12) (12)
-------------- ------------- --------
At 31 March 2019 50 (29,189) (29,139)
============== ============= ========
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019
1 Accounting policies
Summary of significant accounting policies and key accounting
estimates
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
Statement of compliance
These financial statements were prepared in accordance with
Financial Reporting Standard 102 'The Financial Reporting Standard
applicable in the UK and Republic of Ireland'.
Basis of preparation
These financial statements have been prepared using the
historical cost convention except that as disclosed in the
accounting policies certain items are shown at fair value.
The presentation currency of these financial statements is
sterling. All amounts in the financial statements have been rounded
to the nearest GBP1,000.
Name of parent of group
These financial statements are consolidated in the financial
statements of Connect M77/GSO Holdings Limited.
The financial statements of Connect M77/GSO Holdings Limited may
be obtained from Level 6, 350 Euston Road, London, NW1 3AX.
Summary of disclosure exemptions
In these financial statements, the Company is considered to be a
qualifying entity (for the purposes of this FRS) and the
consolidated financial statements of the parent company include the
equivalent disclosures, the Company has taken exemptions under FRS
102 available in respect of the following disclosures:
-- The disclosures required by FRS 102.7 statement of cash flows
and FRS 102.3.17(d) financial statement presentation,
-- The disclosures required by FRS 102.11 Basic Financial instruments,
and
-- FRS 102.12 Other Financial Instrument Issues in respect of
financial instruments not falling within the fair value accounting
rules of Paragraph 36 (4) of Schedule 1.
The Company proposes to continue to adopt the reduced disclosure
framework of FRS 102 in its next financial statements.
Going concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report on pages 1 to 2 and the
Directors' Report on pages 3 and 4.
The Directors have reviewed the Company's supply chain and do
not believe that any specific risk has been identified. The
Directors have also considered the ability of the client to
continue to pay unitary fees due under the D.B.F.O Contract to the
Company and do not consider this to be a material risk. The
Company's forecasts and projections, taking account of reasonably
possible counterparty performance, show the Company expects to be
able to continue to operate for the full term of the concession.
After making enquiries, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the annual report and
financial statements.
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
1 Accounting policies (continued)
Turnover
In the operational phase, revenue is recognised by allocating a
proportion of total unitary income receivable over the life of the
project to service costs by means of a deemed constant rate of
return on these costs. Revenue is recognised by applying a 5%
mark-up on the operational costs, representing the fair value of
operational services.
Financial asset
Classification
The Company has elected to apply the provisions of Section 11
'Basic Financial Instruments' and Section 12 'Other Financial
Instruments Issues' of FRS 102 as per IAS39 to all of its financial
instruments. Financial assets are recognised in the Company's
balance sheet when the Company becomes party to the contractual
provisions of the instrument.
Financial assets have been classified as 'loans and
receivables', which includes cash and cash equivalents. The
classification depends on the nature and purpose of the financial
assets and is determined at the time of recognition.
Recognition and measurement
Basic financial assets, which include trade and other
receivables and cash and bank balances, are initially measured at
transaction price including transaction costs and are subsequently
carried at amortised cost using the effective interest method,
unless the arrangement constitutes a financing transaction, where
the transaction is measured at the present value of the future
receipts discounted at a market rate of interest. Other financial
assets classified as fair value through profit or loss are measured
at fair value.
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
also classified as 'loans and receivables'. Loans and receivables
are measured at amortised cost using the effective interest rate
method, less any impairment. Interest income is recognised by
applying the effective interest rate except for short term
receivables where the recognition of interest would be
immaterial.
Cash and cash equivalents comprise cash on hand, demand
deposits, and other short term highly liquid investments, that are
readily convertible into cash and are subject to an insignificant
risk of change in value.
Impairment
Financial assets are impaired where there is objective evidence
that as a result of one or more events that have occurred after the
initial recognition of the financial asset, the estimated future
cash flows have been impacted. The carrying amount of a financial
asset is reduced by the impairment directly with the exception of
trade receivables which would be reduced through the use of an
allowance account, unless it is considered that it is
uncollectible.
The Company derecognises a financial asset only when the
contractual rights to receive the cash flows from the asset expire,
or it transfers the financial asset and substantially all the risk
and rewards of ownership of the asset to another entity.
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
1 Accounting policies (continued)
Other financial assets and financial liabilities
Financial assets and financial liabilities are recognised in the
Company's balance sheet when the Company becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Fixed rate senior secured bonds
Senior secured bonds are initially stated at the amount of the
net proceeds after deduction of related issue costs. The carrying
amount is increased by the finance cost in respect of the
accounting period and reduced by payments made in that period.
Finance costs
Finance costs in relation to the fixed rate senior secured bonds
and the secured loan stock are recognised using the effective
interest rate method under FRS 102 whereby expected interest over
the life of the project is spread and recognised in each
period.
Tax
Current tax is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or
substantively enacted at the balance sheet date.
Deferred tax is recognised in full in respect of all timing
differences that have originated but not reversed at the balance
sheet date where transactions or events that results in an
obligation to pay more tax in the future or a right to pay less tax
in the future have occurred at the balance sheet date. Timing
differences are differences between the Company's taxable profits
and its results as stated in the financial statements that arise
from the inclusion of gains and losses in tax assessments in
periods different from those in which they are recognised in the
financial statements.
Deferred tax is measured at the average tax rates that are
expected to apply in the periods in which the timing differences
are expected to reverse based on tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is measured on a non-discounted basis.
Where items recognised in other comprehensive income or equity
are chargeable to or deductible for tax purposes, the resulting
current or deferred tax expense or income is presented in the same
component of comprehensive income or equity as the transaction or
other event that resulted in the tax expense or income.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of change in value.
Investments due within one year represent amounts held on
deposit > 1 month with a financial institution which are
available for withdrawal within that time.
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
1 Accounting policies (continued)
Trade and other debtors/creditors
Trade and other debtors are recognised initially at transaction
price less attributable transaction costs. Trade and other
creditors are recognised initially at transaction price plus
attributable transaction costs. Subsequent to initial recognition
they are measured at amortised cost using the effective interest
method, less any impairment losses in the case of trade debtors. If
the arrangement constitutes a financing transaction, for example if
payment is deferred beyond normal business terms, then it is
measured at the present value of future payments discounted at a
market rate of instrument for a similar debt instrument.
2 Critical accounting estimates and judgements
The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities are as follows.
Critical judgements
In the application of the Company's accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised where the revision
affects only that period, or in the period of the revision and
future periods where the revision affects both current and future
periods.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities are as follows.
Service concession arrangement
The Company accounts for the project as a service concession
arrangement. The directors have used their judgement in selecting
the appropriate accounting basis for the concession. As the payment
mechanism is now based on a fixed usage, the Directors deemed it
suitable for the accounting basis to be changed from a fixed asset
to a financial asset as at 31st March 2016. The directors use their
judgement in selecting the appropriate financial asset rate to be
applied in order to allocate the income received between revenue,
and capital repayment of and interest income on the financial
asset; and also the service margin currently 5% that is used to
recognise service revenue. The directors have also used their
judgement in assessing the appropriateness of the future
maintenance costs that are included in the Company's forecasts. The
directors will continue to monitor the condition of the assets and
undertake a regular review of maintenance spend.
3 Analysis of turnover
Turnover by origin and destination from the Company's principal
activity
2019 2018
GBP 000 GBP 000
UK 2,926 2,380
======== ========
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
4 Directors' remuneration
The Directors received no salary in the performance of their
duties during the current or preceding year. All costs of the
Directors are borne by the shareholders of the ultimate parent
companies, who second their employees to the Company.
5 Staff costs
The Company had no employees in the current or preceding year.
All costs of staff are borne by the shareholders of the ultimate
parent companies, who second their employees to the Company.
6 Auditors' remuneration
The audit fee for the Company amounted to GBP18k (2018:
GBP18k).
There were no non-audit fees (2018: GBPnil).
7 Interest receivable and similar income
2019 2018
GBP 000 GBP 000
Interest income on financial assets 9,493 9,598
Interest on bank accounts and deposits 39 12
------------------- -------------------
9,532 9,610
=================== ===================
8 Interest payable and other expenses
2019 2018
GBP 000 GBP 000
Secured bond interest 7,522 7,708
Secured loan stock interest 2,156 2,042
------------------- -------------------
9,678 9,750
=================== ===================
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
9 Taxation
Tax charged/(credited) in the income statement
2019 2018
GBP 000 GBP 000
Current taxation
UK corporation tax adjustment to prior
periods - 4
Deferred taxation
Arising from origination and reversal of
timing differences (2) (6)
Arising from changes in tax rates and laws - 1
-------- --------
Total deferred taxation (2) (5)
-------- --------
Tax receipt in the income statement (2) (1)
======== ========
The tax on profit before tax for the year is higher than the
standard rate of corporation tax in the UK (2018 - higher than the
standard rate of corporation tax in the UK) of 19% (2018 -
19%).
The differences are reconciled below:
2019 2018
GBP 000 GBP 000
Loss before tax (14) (33)
======== ========
Corporation tax at standard rate (3) (6)
Effect of expense not deductible in determining
taxable profit (tax loss) 1 -
Deferred tax expense relating to changes
in tax rates or laws - 1
Increase in UK and foreign current tax
from adjustment for prior periods - 4
-------- --------
Total tax credit (2) (1)
======== ========
The Company earns its results in the UK, therefore the tax rate
used for tax on profit on ordinary activities is the current UK
corporation tax rate of 19% (2018: 19%).
For the year ended 31 March 2019, a corporation tax rate of 19%
has been applied in line with rates enacted by the Finance Act
2016. The Finance Act 2016, which was substantively enacted on 6
September 2016, provided for a reduction in the main rate of UK
corporation tax to 19% effective from 1 April 2017 and a further
reduction to 17% from 1 April 2020.
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
10 Deferred tax asset/(liability)
2019 2018
GBP 000 GBP 000
At 1 April (1,552) (1,557)
Charged to other comprehensive income 2 6
Effect of change in tax rate - (1)
--------------- ---------------
(1,550) (1,552)
=============== ===============
Capitalised
Trading losses interest
GBP 000 GBP 000
At 1 April 15 (1,567)
Movement 2 -
-------------- -----------
At 31 March 17 (1,567)
============== ===========
11 Financial asset
2019 2018
GBP 000 GBP 000
Balance brought forward 123,893 125,268
Service income received in the year (14,557) (14,078)
Operating revenues 2,786 2,259
Lifecycle replacement costs 839 846
Notional interest 9,493 9,598
-------------- -----------
Balance carried forward 122,454 123,893
============== ===========
Financial asset comprising:
2019 2018
GBP 000 GBP 000
Amounts falling due within one year 1,759 1,073
Amounts falling due after more than one
year 120,695 122,820
-------- --------
122,454 123,893
======== ========
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
12 Debtors
2019 2018
GBP 000 GBP 000
Trade debtors 1,461 -
Prepayments and accrued income 215 148
------------- ------------
1,676 148
============= ============
13 Current asset investments
The following current asset investments include restricted cash
which cannot be used to fund the on-going operations of the
Company:
2019 2018
GBP 000 GBP 000
Debt service reserve 8,679 8,509
Tax reserve account 8,009 8,358
-------- --------
16,688 16,867
======== ========
14 Creditors
2019 2018
GBP 000 GBP 000
Due within one year
Trade creditors 479 190
Accruals and deferred income 1,994 1,705
VAT payable 202 205
Fixed rate senior secured bonds 4,344 3,911
Corporate tax liability 177 355
-------- --------
7,196 6,366
======== ========
Due after one year
Fixed rate guaranteed senior secured bonds 122,342 126,504
Secured loan stock 14,865 14,865
Secured loan stock interest 25,912 23,757
-------- --------
163,119 165,126
======== ========
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
14 Creditors (continued)
Fixed rate guaranteed senior secured bonds due 2034 of
GBP152,429,000 were issued on 7 May 2003. The bonds have been
unconditionally and irrevocably guaranteed by Syncora Guarantee
(UK) Limited (formerly XL Capital Assurance (UK) Limited) for
payment of principal and interest.
Interest on the bonds is payable semi-annually in arrears on 31
March and 30 September in each year at a fixed rate of 5.404% per
annum commencing on 30 September 2003.
Unless previously redeemed or purchased and cancelled, the bonds
will mature on 31 March 2034 and are subject to redemption in part
from, and including, 30 September 2006 in accordance with the
amortisation schedule set out in the bonds offering circular.
The secured loan stock bears interest at 12.1% per annum and
accrues from the date of final completion. It is redeemable in
instalments between 2015 and 2035, or as the Company elects, but
subject to certain restrictions in the collateral deed. The secured
loan stock issued by the Company is held by the Company's immediate
parent companies. The Company's immediate parent companies have
waived their rights to receive interest within 12 months for the
years ending 31 March 2018 and 31 March 2019.
All borrowings contain either a fixed or varying security
interest over the assets of the Company, as defined by an
intercreditor agreement. The bonds have certain covenants
attached.
Fixed rate guaranteed senior secured bonds are stated net of
unamortised issue costs of GBP1,989,000 (2018: GBP2,172,000). The
Company incurred total issue costs of GBP4,403,000 in respect of
the fixed rate bonds. These costs, together with the interest
expense, are allocated to the profit and loss amount over the term
of the bonds. Interest is calculated using the effective interest
rate method.
The Company has committed borrowing facilities available of
GBP167,294,000 which have been fully drawn as at 31 March 2019
(2018 - GBP167,294,000)
15 Loans and borrowings
Loans not wholly repayable within five years:
2019 2018
GBP 000 GBP 000
Fixed rate guaranteed senior secured bonds 128,676 132,587
Secured loan stock 14,865 14,865
-------- --------
143,541 147,452
======== ========
Analysis of maturity of debt:
2019 2018
GBP 000 GBP 000
Within one year or on demand 4,344 3,911
Between one and two years 4,808 4,344
Between two and five years 17,256 15,880
After five years 117,133 123,317
-------- --------
143,541 147,452
======== ========
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
16 Financial instruments
Capital risk management
The Company manages its capital to ensure its ability to
continue as a going concern, to meet the requirements of its
collateral deed and to maintain an optimal capital structure to
reduce the cost of capital. The capital structure of the Company
comprises equity attributable to equity holders consisting of
ordinary share capital and profit and loss account and cash and
cash equivalents and borrowings. The Company has complied with
capital requirements imposed by the collateral deed throughout the
year. There have been no changes in the Company's management of
capital from previous years.
The principal risks and uncertainties faced are highlighted in
the strategic report on page 2.
The Company has the following financial instruments:
2019 2018
GBP 000 GBP 000
Due on demand or within one year 11,459 11,251
Due within one to two years 11,674 11,459
Due within two to five years 36,098 35,625
Due after more than five years 178,044 190,892
-------- --------
237,275 249,227
======== ========
17 Share capital
Allotted, called up and fully paid shares
2019 2018
No. GBP No. GBP
A Ordinary shares of
GBP1 each 42,500 42,500 42,500 42,500
B Ordinary shares of
GBP1 each 7,500 7,500 7,500 7,500
50,000 50,000 50,000 50,000
====== ====== ====== ======
Connect M77/GSO plc
Notes to the Financial Statements for the Year Ended 31 March
2019 (continued)
18 Related party transactions
Transactions during the year
2019
GBP 000
Balfour Beatty Civil Engineering - operation and
maintenance 3,759
Balfour Beatty Investments - staff secondment charges 234
--------
3,993
========
2018
GBP 000
Balfour Beatty Civil Engineering - operation and
maintenance 2,765
Balfour Beatty Investments - staff secondment charges 162
--------
2,927
========
Outstanding balances at the end of the year
2019
GBP 000
Balfour Beatty - operation and maintenance 202
Balfour Beatty Investments - staff secondment charges 1,047
--------------------------------------
1,249
======================================
2018
GBP 000
Balfour Beatty - operation and maintenance 139
Balfour Beatty Investments - staff secondment charges 926
--------------------------------------
1,065
======================================
19 Parent and ultimate parent undertaking
The Company's immediate parent is Connect M77/GSO Holdings
Limited, incorporated in Great Britain and registered in England
and Wales. Connect M77/GSO Holdings Limited is the largest and
smallest group in which the results of the company are
consolidated. Copies of these financial statements are available
from Level 6, 350 Euston Road, London, NW1 3AX.
The ultimate parent is Balfour Beatty plc and BIIF LP (acting by
its manager, 3i BIFM Investments Ltd), incorporated in United
Kingdom and registered in England and Wales. Copies of the
financial statements are available upon request from 5 Churchill
Place, Canary Wharf, London, E14 5HU and 16 Palace Street, London,
SE1E 5JD respectively.
20 Subsequent events
There have been no material post
balance sheet events.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAEXEDANNEFF
(END) Dow Jones Newswires
July 30, 2019 06:37 ET (10:37 GMT)
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